PEOPLE. RETAINING YOUR MOST VALUABLE ASSET.
CORONAVIRUS JOB RETENTION SCHEME
If you have any questions, please get in touch with our COVID-19 Task Force here
RELEVANT AS OF 1:00PM 31ST MARCH
We were wow’d by the Chancellor’s announcement on Friday 20th March when he committed to pay most of the wages of people that would otherwise have been laid off due to coronavirus. He called it “unprecedented measures for unprecedented times” and we certainly can’t remember any bigger pledge than this ever being provided by this government or previous ones. Lots more detail on the scheme was released on 26 March, here’s the latest.
Who is it for?
The Coronavirus Job Retention Scheme will be available to all UK employers large or small.
What does it offer?
The scheme will cover 80% of monthly wages for employees who are furloughed due to coronavirus, up to a ceiling of £2,500 (gross) per employee. Employer’s national insurance costs and minimum automatic enrolment employer pension contributions payable are also covered, in addition to the £2,500 limit. As the payment is by way of a grant this means that employers do not need to pay HMRC back.
For employees who are paid a regular amount, the monthly wage figure for which the 80% applies is their actual gross salary as at 28 February 2020. There are special rules for certain employees e.g those with variable wages, those on maternity or sick pay.
What is a furloughed employee?
Furloughed employees are those you would like to keep on your payroll, you are unable to provide them with sufficient work, either due to forced closure of your business or a downturn in trading, due to coronavirus. They just need to have been on your payroll as of 28 February 2020.
Furloughed employees will not be allowed to undertake any work for you during the period you wish to claim for. This includes anything that makes you money or provides you with a service. They can undertake training, if their job requires it. In this case you need to make sure that they are being paid the national minimum wage for the hours that they spend training.
Employees can be furloughed in and out of the scheme although there is a three week minimum period.
If you have made employees redundant since 1 March 2020 due to coronavirus, you are able to re-employ and furlough them if you choose.
How do I claim?
The scheme will be open before the end of April and can be backdated to start from 1 March 2020. The timing of receiving the grant may therefore not align to the payroll cost so it is worth thinking about the cashflow impact.
In the meantime, you should pay your furloughed employees at least 80% of their regular wage (see details above), or £2,500 per month if this is lower. This should be processed through your payroll as usual. You can choose to top up your employees’ salary beyond this, but you are not able to reclaim anything further under the scheme.
The coronavirus job retention scheme is initially available for three months, but the message was that this could be extended if necessary. The government promised there is no limit to how much this might cost.
What should I do right now?
We recommend planning for at least the next three months and thinking about which of your people you will need to continue to run your business in the short term and those which can be ‘furloughed’ to secure their jobs and the future of your business.
You will need to decide quickly whether you need access to this scheme, and which of your employees will be affected. You will need to notify any employees if you are including them in the scheme.
You will also need to consider the employment law position, if you don’t have a specialist employment lawyer who can help, get in touch and we may be able to point you in the right direction.
HMRC are setting up an online portal where employers will be able to enter details about the employees they need to claim for. We will let you know when this is available.
Further details on the scheme, including rules surrounding specific situations such as employees who are on maternity leave, can be found here.
Where employees will be receiving reduced pay due to being furloughed, they will need to consider if this makes them eligible to claim any benefits from the government. This could include child benefit, particularly where an employees’ usual salary takes them over the £50,000 threshold but their taxable income for the tax year will now be below this. You could point your employees here for more information on this and other things they may wish to consider if they are being furloughed.
We consider the scheme will go a long way in providing financial security for your employees. It means your business can focus on keeping going during these difficult times and hitting the ground running when things pick up again.
If you need help or have queries about the coronavirus job retention scheme, then get in touch with Mark Baxter.